<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB
(Mark One)

         [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2005

                                       or

               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from to

                         Commission File Number 0-12950

                          ALLIANCE PHARMACEUTICAL CORP.
             (Exact name of Registrant as specified in its charter)

New York                                              14-1644018
---------------------------------                     -------------------------
(State or other jurisdiction                          (I.R.S. Employer
of incorporation or organization)                     Identification Number)

4660 La Jolla Village Dr, #825
San Diego, California                                 92122
---------------------------------                     -------------------------
(Address of principal                                 Zip Code
executive offices)

Registrant's telephone number,
including area code:                                  (858) 410-5200
                                                      -------------------------

Indicate by a check whether the registrant (1) has filed all reports required to
be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.

Yes [X]         No [ ]

As of May 11, 2005, Registrant had 34,120,206 shares of its Common Stock, $.01
par value, outstanding.


<PAGE>


ALLIANCE PHARMACEUTICAL CORP.
-----------------------------


INDEX
-----

                                                                        Page No.
                                                                        --------

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheet (unaudited)                   3

         Condensed Consolidated Statements of Operations (unaudited)        4

         Condensed Consolidated Statements of Cash Flows (unaudited)        5

         Notes to Unaudited Condensed Consolidated Financial Statements     6

Item 2.  Management's Discussion and Analysis or Plan of Operation         17

Item 3.  Controls and Procedures                                           23

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                 24

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds       25

Item 3.  Defaults Upon Senior Securities                                   26

Item 4.  Submission of Matters to a Vote of Security Holders               26

Item 5   Other Information                                                 26

Item 6.  Exhibits                                                          26


                                       2
<PAGE>

PART I FINANCIAL INFORMATION:
ITEM 1.  FINANCIAL STATEMENTS

ALLIANCE PHARMACEUTICAL CORP.
-----------------------------
CONDENSED CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------

                                                                     MARCH 31,
                                                                       2005
                                                                  -------------
ASSETS                                                            (UNAUDITED)
------

CURRENT ASSETS:
    Cash and cash equivalents                                     $   6,935,000
    Other current assets                                                109,000
                                                                  -------------
              Total current assets                                    7,044,000

PROPERTY AND EQUIPMENT - NET                                             57,000
RESTRICTED CASH                                                       1,000,000
OTHER ASSETS - NET                                                       12,000
                                                                  -------------
                                                                  $   8,113,000
                                                                  =============

LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------

CURRENT LIABILITIES:
    Accounts payable                                              $   1,309,000
    Accrued expenses                                                  1,566,000
    Senior convertible notes payable                                 11,133,000
                                                                  -------------
              Total current liabilities                              14,008,000

OTHER LIABILITIES                                                     1,250,000

STOCKHOLDERS' DEFICIT:
    Preferred stock - $.01 par value; 5,000,000 shares
      authorized; Series F preferred stock - 793,750
      issued and outstanding at March 31, 2005                            8,000
    Common stock - $.01 par value; 125,000,000 shares
      authorized; 33,520,206 shares issued and
      outstanding at March 31, 2005                                     335,000
    Additional paid-in capital                                      475,251,000
    Accumulated deficit                                            (482,739,000)
                                                                  -------------
              Total stockholders' deficit                            (7,145,000)
                                                                  -------------
                                                                  $   8,113,000
                                                                  =============


SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                       3
<PAGE>

<TABLE>
ALLIANCE PHARMACEUTICAL CORP.
-----------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------

                                               THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                   MARCH 31,                           MARCH 31,
                                             2005              2004              2005              2004
                                         ------------      ------------      ------------      ------------
                                                  (UNAUDITED)                         (UNAUDITED)
<S>                                      <C>               <C>               <C>               <C>
REVENUES:
   Royalty, license and research
     revenue                             $  1,383,000      $         --      $  1,455,000      $     64,000

OPERATING EXPENSES:
   Research and development                   376,000           205,000         1,575,000           588,000
   General and administrative                 851,000           326,000         2,057,000           791,000
                                         ------------      ------------      ------------      ------------
                                            1,227,000           531,000         3,632,000         1,379,000
                                         ------------      ------------      ------------      ------------
INCOME (LOSS) FROM OPERATIONS                 156,000          (531,000)       (2,177,000)       (1,315,000)

INVESTMENT INCOME                              41,000             1,000           106,000             7,000
OTHER INCOME                                       --                --            10,000            84,000
INTEREST EXPENSE                             (170,000)               --        (2,579,000)       (2,156,000)
GAIN ON DISPOSITION OF ASSETS                  44,000        13,312,000           303,000        15,724,000
                                         ------------      ------------      ------------      ------------
NET INCOME (LOSS)                        $     71,000      $ 12,782,000      $ (4,337,000)     $ 12,344,000
                                         ============      ============      ============      ============

NET INCOME (LOSS) PER COMMON
  SHARE, BASIC                           $       0.00      $       0.45      $      (0.11)     $       0.44
                                         ============      ============      ============      ============
NET INCOME (LOSS) PER COMMON
  SHARE, DILUTED                         $       0.00      $       0.43      $      (0.11)     $       0.42
                                         ============      ============      ============      ============

WEIGHTED AVERAGE SHARES OUTSTANDING,
  BASIC                                    33,130,000        28,442,000        40,784,000        28,240,000
                                         ============      ============      ============      ============
WEIGHTED AVERAGE SHARES OUTSTANDING,
  DILUTED                                  33,766,000        29,984,000        40,784,000        29,581,000
                                         ============      ============      ============      ============


              SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                                     4
</TABLE>
<PAGE>

<TABLE>
ALLIANCE PHARMACEUTICAL CORP.
-----------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------------------------------------------------
                                                                                        NINE MONTHS ENDED
                                                                                            MARCH 31,
                                                                                     2005               2004
                                                                                  ------------      ------------
                                                                                           (UNAUDITED)
OPERATING ACTIVITIES:
<S>                                                                               <C>               <C>
   Net income (loss)                                                              $ (4,337,000)     $ 12,344,000
   Adjustments to reconcile net income (loss) to net cash used in operations:
      Depreciation and amortization                                                      7,000                --
      Accrued interest on senior convertible notes payable                             341,000                --
      Compensatory stock options                                                        11,000             5,000
      Beneficial conversion expense                                                  2,238,000         2,000,000
      Gain on disposition of asset                                                    (303,000)      (15,724,000)
      Changes in operating assets and liabilities:
         Restricted cash and other assets                                               26,000           566,000
         Accounts payable, accrued expenses and other liabilities                      415,000        (1,496,000)
                                                                                  ------------      ------------
Net cash used in operating activities                                               (1,602,000)       (2,305,000)
                                                                                  ------------      ------------

INVESTING ACTIVITIES:
   Purchases of property and equipment                                                 (18,000)               --
   Proceeds from disposition of assets                                                 126,000           963,000
                                                                                  ------------      ------------
Net cash provided by investing activities                                              108,000           963,000
                                                                                  ------------      ------------

FINANCING ACTIVITIES:
   Issuance of common stock                                                                 --           195,000
   Proceeds from debt                                                                       --           500,000
                                                                                  ------------      ------------
Net cash provided by financing activities                                                   --           695,000
                                                                                  ------------      ------------

DECREASE IN CASH AND CASH EQUIVALENTS                                               (1,494,000)         (647,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                     8,429,000           763,000
                                                                                  ------------      ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        $  6,935,000      $    116,000
                                                                                  ============      ============

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Issuance of common stock in exchange for cancellation of warrant                  $     25,000      $         --
                                                                                  ============      ============
Issuance of senior convertible notes for common stock                             $ 10,692,000      $         --
                                                                                  ============      ============
Issuance of senior convertible notes for secured convertible note                 $    500,000      $         --
                                                                                  ============      ============
Issuance of common stock upon conversion of senior notes and interest             $    399,000      $         --
                                                                                  ============      ============
Reclassification of warrant liability                                             $  7,942,000      $         --
                                                                                  ============      ============


                 SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                                        5
</TABLE>
<PAGE>

ALLIANCE PHARMACEUTICAL CORP.
-----------------------------
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                                 MARCH 31, 2005

1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION
------------

         Alliance Pharmaceutical Corp. and its subsidiaries (collectively, the
"Company", "Alliance", "we" or "us") are engaged in identifying, designing and
developing novel medical products. Currently, the Company is focused on
developing its lead product, OXYGENT(TM), an intravascular oxygen carrier
designed to reduce the need for donor blood in surgical and other patients at
risk of acute tissue hypoxia (oxygen deficiency). In addition, Alliance is
developing intellectual property and know-how for potential products to treat
immune disorders, including autoimmune disease, cancer and infectious disease.

LIQUIDITY AND BASIS OF PRESENTATION
-----------------------------------

         The accompanying condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern which
contemplates, among other things, the realization of assets and satisfaction of
liabilities in the ordinary course of business. The Company has incurred
operating losses through March 31, 2005 and has negative working capital at that
date of approximately $7 million. These factors, among others, raise substantial
doubt about the Company's ability to continue as a going concern.

         The Company believes it has sufficient working capital to fund its
operations for the next 12 months. As discussed in Note 4, in June 2004, the
Company completed a private placement of its common stock with net proceeds to
the Company of approximately $10 million (the "June Private Placement"). In
September 2004, the terms of the June Private Placement were rescinded by mutual
agreement of the Company and investors holding approximately $10.7 million of
the original $11 million invested by the various investors in the June Private
Placement. Concurrently, the investors who elected to rescind the June Private
Placement were issued senior convertible promissory notes in like investment
amounts (the "Senior Notes"). Due to certain restrictive covenants, including,
without limitation, a covenant that the Company maintain at least $5.5 million
in cash or cash equivalents on hand at all times while the Senior Notes are
outstanding, the Senior Notes may become current prior to June 30, 2005. If this
were to occur, the Company would have to raise additional funds to repay the
Senior Notes or renegotiate their terms. The accompanying unaudited condensed
consolidated financial statements do not include the adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amount and classification of liabilities that may result from the outcome of
this uncertainty.

PRINCIPLES OF CONSOLIDATION
---------------------------

         The consolidated financial statements include the accounts of Alliance
Pharmaceutical Corp., and its wholly owned subsidiaries Molecular Biosystems,
Inc. ("MBI"), Astral, Inc. ("Astral"), MDV Technologies, Inc., Alliance
Pharmaceutical GmbH, its majority-owned subsidiary Talco Pharmaceutical, Inc.,
and its majority-owned subsidiary PFC Therapeutics, LLC ("PFC Therapeutics")
from June 18, 2003, when Alliance acquired Baxter Healthcare Corporation's
("Baxter") ownership interest. The Company's subsidiaries have minimal
operations and all significant intercompany accounts and transactions have been
eliminated.


                                        6
<PAGE>

INTERIM UNAUDITED CONDENSED FINANCIAL STATEMENTS
------------------------------------------------

         The condensed consolidated balance sheet as of March 31, 2005, the
condensed consolidated statements of operations for the three months and nine
months ended March 31, 2005 and 2004, and the condensed consolidated statements
of cash flows for the nine months ended March 31, 2005 and 2004 are unaudited.
In the opinion of management, such unaudited financial statements include all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation of the results for the periods presented. Interim results are not
necessarily indicative of the results to be expected for the full year. The
financial statements should be read in conjunction with the Company's audited
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended June 30, 2004.

USE OF ESTIMATES
----------------

         The preparation of financial statements in conformity with accounting
principles generally accepted in the U.S. requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
disclosures made in the accompanying notes to the condensed consolidated
financial statements. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS
-------------------------

         The Company considers instruments purchased with an original maturity
of three months or less to be cash equivalents.

CONCENTRATION OF CREDIT RISK
----------------------------

         Cash and cash equivalents are financial instruments that potentially
subject the Company to concentration of credit risk. The Company invests its
excess cash primarily in U.S. government securities and debt instruments of
financial institutions and corporations with strong credit ratings. The Company
has established guidelines relative to diversification and maturities to
maintain safety and liquidity. These guidelines are reviewed periodically and
modified to take advantage of trends in yields and interest rates.

REVENUE RECOGNITION
-------------------

         Revenue is generally recognized when all contractual obligations have
been satisfied and collection of the resulting receivable is reasonably assured.

         LICENSING AND ROYALTY REVENUES
         ------------------------------
         Licensing and royalty revenues for which no services are required to be
performed in the future are recognized immediately, if collectibility is
reasonably assured.

RESEARCH AND DEVELOPMENT EXPENSES
---------------------------------

         Research and development expenditures are charged to expense as
incurred. Research and development expenditures include the cost of salaries and
benefits for clinical, scientific, manufacturing, engineering and operations
personnel, payments to outside researchers for preclinical and clinical trials
and other product development work, payments related to facility lease and
utility expenses, depreciation and amortization, patent costs, as well as other
expenditures. In the nine-month periods ended March 31, 2005 and 2004, the
Company incurred research and development expenses of $1.6 million and $588,000,
respectively.

COMPUTATION OF EARNINGS PER COMMON SHARE
----------------------------------------

         Basic earnings (loss) per share was computed by dividing the net income
(loss) by the weighted average number of common shares outstanding during the
period. Diluted earnings per share for the three months ended March 31, 2005 and
2004 and the nine months ended March 31, 2004 reflect the potential dilution


                                       7
<PAGE>

that could occur if net income was divided by the weighted average number of
common shares, plus common shares from the exercise of outstanding stock options
and warrants, and the conversion of convertible debt and preferred stock where
the effect of those securities is dilutive. All potential dilutive common shares
have been excluded from the calculation of diluted loss per share for the nine
months ended March 31, 2005, as their inclusion would be anti-dilutive. The
computations for basic and diluted earnings per share are as follows:

<TABLE>
                                             INCOME/(LOSS)        SHARES         INCOME/(LOSS)
                                              (NUMERATOR)      (DENOMINATOR)      PER SHARE
                                             ------------      ------------     ---------------
<S>                                          <C>                 <C>            <C>
Three Months ended March 31, 2005
Basic earnings per share:
     Net income                              $     71,000        33,130,000     $          0.00
Diluted earnings per share:
     Dilutive stock options and warrants               --             1,000
     Series F preferred stock                          --           635,000
                                             ------------      ------------     ---------------
     Net income plus assumed conversions     $     71,000        33,766,000     $          0.00
                                             ============      ============     ===============

NINE MONTHS ENDED MARCH 31, 2005
     Basic and diluted loss per share        $ (4,337,000)       40,784,000     $         (0.11)
                                             ============      ============     ===============

THREE MONTHS ENDED MARCH 31, 2004
Basic earnings per share:
     Net income                              $ 12,782,000        28,442,000     $          0.45
Diluted earnings per share:
     Dilutive stock options and warrants               --           907,000
     Series F preferred stock                          --           635,000
                                             ------------      ------------     ---------------
     Net income plus assumed conversions     $ 12,782,000        29,984,000     $          0.43
                                             ============      ============     ===============

NINE MONTHS ENDED MARCH 31, 2004
Basic earnings per share:
     Net income                              $ 12,344,000        28,240,000     $          0.44
Diluted earnings per share:
     Dilutive stock options and warrants               --           706,000
     Series F preferred stock                          --           635,000
                                             ------------      ------------     ---------------
     Net income plus assumed conversions     $ 12,344,000        29,581,000     $          0.42
                                             ============      ============     ===============

</TABLE>

ACCOUNTING FOR STOCK-BASED COMPENSATION
---------------------------------------

         The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." The Company in its financial statements applies Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations in accounting for its stock option plans, and
accordingly, no compensation cost has been recognized for stock options in the
three-month and nine-month periods ended March 31, 2005 or 2004. If the Company
had elected to recognize compensation cost based on the fair value of the
options granted at grant date and amortized to expense over their vesting period
as prescribed by SFAS No. 123, the Company's net income (loss) and net income
(loss) per share would have been adjusted to the pro forma amounts indicated
below for the three months and nine months ended March 31:


                                       8
<PAGE>

<TABLE>
                                            THREE MONTHS      THREE MONTHS        NINE MONTHS          NINE MONTHS
                                                ENDED             ENDED               ENDED               ENDED
                                              MARCH 31,         MARCH 31,           MARCH 31,           MARCH 31,
                                                2005              2004                2005                2004
                                         -----------------   ----------------    ---------------    ----------------
<S>                                      <C>                 <C>                 <C>                <C>
Net income (loss):
     As reported                         $         71,000    $     12,782,000    $    (4,337,000)   $     12,344,000
     Fair value of stock-based
        employee compensation                    (161,000)           (198,000)          (478,000)           (591,000)
                                         -----------------   ----------------    ---------------    ----------------
     Pro forma                           $        (90,000)   $     12,584,000    $    (4,815,000)   $     11,753,000
                                         ================    ================    ===============    ================

Net income (loss) per share, basic
     As reported                         $           0.00    $          0.45     $         (0.11)   $           0.44
     Pro forma                           $           0.00    $          0.44     $         (0.12)   $           0.42

Net income (loss) per share, diluted
     As reported                         $           0.00    $          0.43     $         (0.11)   $           0.42
     Pro forma                           $           0.00    $          0.42     $         (0.12)   $           0.40

</TABLE>

         The impact of outstanding non-vested stock options granted prior to
1996 (the effective date of SFAS 123) has been excluded from the pro forma
calculations; accordingly, the pro forma adjustments for the three-month and
nine-month periods ended March 31, 2005 and 2004 are not indicative of future
period pro forma adjustments if the calculation reflected all applicable stock
options. The fair value of options at date of grant was estimated using the
Black-Scholes option-pricing model with the following assumptions for the
periods, respectively: risk-free interest rate range of 1.7% to 4.6% and 3.25%
to 6.5%; dividend yield of 0% for all periods; volatility factor of 139% and
135%; and a weighted-average expected term of 7 years for all periods. The
estimated weighted average fair value at grant date for the options granted
during the three-month and nine-month periods ended March 31, 2005 was $0.27 per
option. The estimated weighted average fair value at grant date for the options
granted during the three-month and nine-month periods ended March 31, 2004 was
$0.41 and $0.17 per option, respectively.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
-----------------------------------------

         In December 2004, the FASB issued SFAS No. 123 (revised 2004),
"Share-Based Payment" ("Statement 123(R)") to provide investors and other users
of financial statements with more complete and neutral financial information by
requiring that the compensation cost relating to share-based payment
transactions be recognized in financial statements. That cost will be measured
based on the fair value of the equity or liability instruments issued. Statement
123(R) covers a wide range of share-based compensation arrangements including
share options, restricted share plans, performance-based awards, share
appreciation rights, and employee share purchase plans. Statement 123(R)
replaces SFAS No. 123 and supersedes APB 25. SFAS No. 123, as originally issued
in 1995, established as preferable a fair-value-based method of accounting for
share-based payment transactions with employees. However, SFAS No. 123 permitted
entities the option of continuing to apply the guidance in APB 25, as long as
the footnotes to financial statements disclosed what net income would have been
had the preferable fair-value-based method been used. The Company will be
required to apply Statement 123(R) in fiscal 2007. The Company is in the process
of evaluating whether the adoption of Statement 123(R) will have a significant
impact on the Company's overall results of operations or financial position.

COMPREHENSIVE INCOME (LOSS)
---------------------------

         The Company did not have any items of comprehensive income during the
three-month and nine-month periods ended March 31, 2005 and 2004.


                                       9
<PAGE>

2.  PFC THERAPEUTICS, LLC

         In June 2003, Alliance acquired Baxter's 50% interest in PFC
Therapeutics in exchange for contingent payments to Baxter based on the future
commercial sales of OXYGENT and other products. The fee to Baxter is 2% of all
of Alliance's or PFC Therapeutics' future gross sales, if any, of the products,
with a maximum fee of $30 million. In accordance with SFAS No. 141, BUSINESS
COMBINATIONS, the Company has not recorded the value of the potential
consideration to be issued to Baxter for Baxter's ownership interest in PFC
Therapeutics as the future payments are contingent on future commercial sales of
an undeveloped product.

         PFC Therapeutics has had no operating activity (except the purchase of
the prepaid royalty of $10 million from Alliance in 2000) since inception of the
joint venture.

         Also in June 2003, Alliance and certain of its creditors entered into
an agreement (the "Participation Agreement"), which, among other things, granted
each creditor an ownership interest in the OXYGENT Business (as defined in the
Participation Agreement). In April 2004, Alliance agreed to issue each of these
creditors a warrant to purchase a certain number of shares of Alliance's common
stock. In exchange for the issuance of the warrants, these creditors agreed to
assign all of their rights under the Participation Agreement to Alliance. The
fair value of the warrants issued as determined using Black-Scholes was $2.3
million as recorded in fiscal year 2004. The total ownership interest the
creditors assigned back to Alliance was 11.2% during fiscal year 2004.

         On April 5, 2004, PFC Therapeutics, and Nycomed Denmark ApS
("Nycomed"), a leading European pharmaceutical company, signed a collaboration
agreement for Nycomed to develop and commercialize OXYGENT in Europe (the
"Nycomed Agreement"). Under the terms of the agreement, Nycomed was to be
responsible for the remaining clinical and regulatory development, and future
marketing of OXYGENT within a broad European territory. The agreement also
included an option for Nycomed to acquire OXYGENT rights for China. On July 2,
2004, Nycomed notified Alliance that it was terminating the agreement effective
August 16, 2004. Therefore, the rights to OXYGENT in Europe and China reverted
back to PFC Therapeutics.

         On April 19, 2004, PFC Therapeutics and Il Yang Pharm. Co., Ltd. ("Il
Yang"), a leading South Korean pharmaceutical research and development and
marketing company, signed a licensing, development and marketing agreement
granting Il Yang exclusive rights to promote, market, distribute and sell
OXYGENT for any approved clinical use, including all future approved uses, in
South Korea. Under terms of the agreement, PFC Therapeutics will be initially
responsible for the commercial supply of OXYGENT to Il Yang and will receive a
royalty on OXYGENT sales following commercialization. Il Yang will also make
certain future payments on the completion of various regulatory milestones for
development in Europe and the U.S.

         On December 22, 2004, PFC Therapeutics and LEO Pharma A/S ("LEO"), one
of the leading Danish research-based pharmaceutical companies that markets
significant products within the fields of dermatology, metabolic and
cardiovascular diseases and ophthalmology and antibiotics, signed an Exclusivity
Agreement to enter into a License Agreement, subject to continued due diligence
by LEO, to develop and commercialize OXYGENT in Europe (EU member countries, EU
membership applicants, Norway and Switzerland) and Canada. The terms of the
License Agreement, if entered into, will include certain initial and future
payments to PFC Therapeutics upon the completion of various regulatory and
commercial milestones for OXYGENT development in Europe and royalties on
commercial sales of OXYGENT in Europe and Canada. On January 5, 2005, we
received the non-refundable portion of an exclusivity fee of $100,000 per the
terms of the Exclusivity Agreement. Because the amendment discussed below
extends LEO's due diligence time-period, this amount has been deferred and is
included in current liabilities in the condensed consolidated balance sheet at
March 31, 2005.


                                       10
<PAGE>

         On February 25, 2005, PFC Therapeutics and LEO agreed to amend the
Exclusivity Agreement. The amendment extends the period of time in which LEO may
undertake its due diligence investigation from March 1, 2005 to a date that is
sixty (60) days after submission by the Company to LEO of the results of a
"proof of concept" clinical study in surgery patients to be conducted by the
Company to confirm the results of an earlier pilot study. The Company
anticipates that the "proof of concept" study will commence in the second half
of 2005 and be completed in the first half of 2006; provided, however, that for
so long as the minimum cash covenant set forth in Section 4.12(l) of the Senior
Convertible Promissory Note Purchase Agreement dated September 21, 2004 between
Alliance and certain investors (the "Note Purchase Agreement") is in effect, the
commencement of any such "proof of concept" study will likely require the prior
approval of the Lender Committee (as that term is defined in the Note Purchase
Agreement). Alliance has initiated discussions with the Lender Committee on this
matter. The remaining terms of the Exclusivity Agreement remain in full force
and effect, provided that any definitive license agreement entered into between
PFC Therapeutics and LEO relating to the marketing and commercialization of
OXYGENT will include an additional milestone payment, the amount of which is to
be proposed by Alliance, relating to the "proof of concept" clinical trial
described above.

3.  SALE OF IMAGENT(R) BUSINESS

         On June 18, 2003, Imcor Pharmaceutical Co. ("Imcor"), formerly known as
Photogen Technologies, Inc., acquired certain assets and assumed certain
liabilities from Alliance. The assets acquired by Imcor included all of
Alliance's assets related to designing, developing, manufacturing, marketing,
selling, licensing, supporting and maintaining its IMAGENT product, an
ultrasound contrast agent that was approved by the Federal Food & Drug
Administration ("FDA") for marketing in the U.S. in June 2002. The amount of
consideration was determined through arms-length negotiation. To the extent
obligations with certain creditors were completely settled, Alliance recorded a
gain from sale of assets of $10.6 million during the year ended June 30, 2003,
$15 million during the year ended June 30, 2004, and $303,000 for the nine
months ended March 31, 2005 related to the disposition of this asset.

         For the nine months ended March 31, 2005, Alliance recorded $303,000 as
a gain on the disposition of an asset as a result of Imcor funding $126,000 of
Alliance's obligations, and $177,000 related to creditor settlements or Imcor's
assumed obligations of Alliance. To date, Alliance has recorded $25.9 million as
a gain on the disposition of an asset as a result of Imcor issuing shares of its
stock valued at $3.7 million to Alliance creditors, Imcor funding $1.6 million
of Alliance's obligations, and $20.6 million related to settlement agreements or
Imcor's assumed obligations of Alliance. The remaining required cash payments by
Imcor will not be applied against the corresponding liabilities of Alliance
until Alliance is legally released from the associated liabilities. Alliance
will record an additional gain on disposition of asset at the time that Alliance
is legally released from the liabilities. The balance owed by Imcor to Alliance
to settle remaining liabilities at March 31, 2005 was approximately $235,000.

         In addition, subsequent to the closing and through 2010, Imcor is
obligated to pay Alliance further consideration in the form of an earn-out based
on IMAGENT revenue invoiced (subject to certain reductions).

         The amount of the earn-out will equal, for each year of the earn-out:
(i) 7.5% of IMAGENT revenue up to $20 million; (ii) 10% of IMAGENT revenue
between $20 million and $30 million; (iii) 15% of IMAGENT revenue between $30
million and $40 million; and (iv) 20% of IMAGENT revenue above $40 million. The
earn-out will be reduced by amounts Imcor must pay pursuant to a license
agreement with Schering Aktiengesellschaft ("Schering"), net of payments they
receive from Schering under the license, and amounts of any indemnification
claims Imcor has against Alliance. The earn-out is subject to three additional
offsets (which are to be applied in the manner described in the Asset Purchase
Agreement dated June 18, 2003 by and between Alliance and Imcor (the "Asset
Purchase Agreement")) that entitle Imcor to retain portions of the earn-out
otherwise payable to Alliance:


                                       11
<PAGE>

         o        Up to approximately $1.6 million for an earn-out reduction,
                  depending on the satisfaction of certain conditions;

         o        The amount of any payments not committed to at closing that
                  Imcor makes after the closing to Alliance's creditors plus up
                  to $1 million of litigation expenses for certain patent and
                  other litigation; and

         o        Between $4 million and $5 million, which is the principal and
                  accrued interest under Imcor's prior bridge loans to Alliance,
                  depending on the satisfaction of certain conditions.

         The detail of items comprising the gain on disposition of IMAGENT
assets for the nine months ended March 31, 2005 and 2004 is calculated as
follows (in thousands):

<TABLE>
                     NINE MONTHS ENDED MARCH 31:                    2005           2004
                                                                -----------     -----------
<S>                                                             <C>             <C>
Cash payments funded by Imcor for liabilities of Alliance       $       126     $       963
Issuance of Imcor common stock to Alliance creditors                     --           3,677
Assumption by Imcor of operating liabilities and other debt
  and settlements with vendors and creditors of Alliance                177          11,084
                                                                -----------     -----------
Gain on sale of assets of IMAGENT to Imcor                      $       303     $    15,724
                                                                ===========     ===========

</TABLE>

4.  DEBT OBLIGATIONS

PFC NOTE
--------

         On November 20, 2003, PFC Therapeutics issued a secured convertible
note in the principal amount of $500,000 (the "PFC Note") to an investor. The
investor also received a warrant to purchase a number of units of ownership
interests of PFC Therapeutics representing 10% of its issued and outstanding
units (determined on a fully-diluted basis on the date of exercise of the
warrant) at an exercise price of $0.01 per unit, at any time or from time to
time from January 31, 2004 to and including January 31, 2009. The principal
amount of the PFC Note was classified in the other liabilities section of the
consolidated balance sheet at June 30, 2004. The Company had recorded imputed
interest expense of $1 million based on the estimated fair value of the warrant.
In September 2004, the holder of the PFC Note exchanged such warrant for
2,500,000 shares of common stock of the Company, which were issued in October
2004, valued at $1 million based on the estimated fair value on the date of
grant, and the PFC Note for a Senior Note (described below) in the principal
amount of $500,000 payable directly by the Company. The principal plus interest
due on the Senior Notes is included in the current liabilities section of the
unaudited condensed consolidated balance sheet at March 31, 2005.

JUNE PRIVATE PLACEMENT
----------------------

         In June 2004, the Company completed its June Private Placement, a
private placement of 31,427,137 shares of its common stock for aggregate gross
proceeds of approximately $11 million. Net proceeds from the transaction, after
issuance costs and placement fees, were approximately $10 million. In connection
with this transaction, the Company also issued five-year warrants to purchase an
additional 23,570,357 shares of its common stock at an exercise price of $0.50
per share. In addition, the Company issued warrants to the placement agent to
purchase 1,571,357 shares of its common stock. Pursuant to the terms of the
registration rights agreements entered into in connection with the June Private


                                       12
<PAGE>

Placement, the Company was required to pay a cash penalty if it failed to file
with the SEC a registration statement under the Securities Act of 1933, as
amended, covering the resale of all of the common stock purchased and the common
stock underlying the issued warrants, including the common stock underlying the
placement agent's warrants. The fair value of the warrants was estimated using
the Black-Scholes option pricing model with the following assumptions: no
dividend, risk-free interest rate of 3.4%, the contractual life of 5 years and
volatility of 139%. In accordance with Emerging Issues Task Force ("EITF") No.
00-19, "Accounting for Derivative Financial Instruments Indexed To and
Potentially Settled In a Company's Own Common Stock", the estimated fair value
in the amount of $7.9 million was recorded as a liability, with an offsetting
charge to additional paid-in capital at June 30, 2004. The warrant liability was
reclassified to additional paid-in capital as of September 30, 2004, the date of
effectiveness of the registration statement, which is the date the potential for
a cash penalty ceased.

         On July 2, 2004, Nycomed notified the Company that it was unilaterally
terminating the Nycomed Agreement (see Note 2) effective August 16, 2004.
Subsequently, a dispute arose between the Company and some of its investors who
participated in the June Private Placement. After considering all of the facts
and circumstances relevant to the dispute, the Company's board of directors
determined that it was in the Company's and the Company's stockholders' best
interests to offer, as a settlement of the dispute, to rescind the June Private
Placement.

         On September 24, 2004, investors holding 30,546,423 shares of common
stock and warrants to purchase 22,909,821 shares of common stock representing
approximately $10.7 million of the approximately $11 million invested in the
June Private Placement elected to rescind the June Private Placement. In doing
so, each of these investors returned to the Company its stock certificate
representing the number of shares and the warrant that it received in the June
Private Placement for cancellation. Immediately thereafter, these same investors
entered into the Senior Note Purchase Agreement whereby the Company issued to
such investors Senior Notes convertible into common stock at $0.25 per share in
principal amounts equal to the amounts such investors invested in the June
Private Placement.

         After giving effect to both transactions, the Company issued 880,714
shares of common stock, warrants to purchase 660,536 shares of common stock
remained outstanding from the June Private Placement, and the Company issued
Senior Notes in an aggregate principal amount of approximately $10.7 million.

         The Company recorded a beneficial conversion feature ("BCF") charge of
$2.2 million (included in interest expense) at September 30, 2004, based on the
difference between the $0.25 conversion rate of the Senior Notes and the closing
price of $0.30 of the Company's common stock on September 24, 2004. Such BCF
charge includes the conversion of the $500,000 PFC Note.

         The Senior Notes are due the earlier of March 24, 2006, or an event of
default (as defined). The Senior Notes can be converted at anytime prior to the
maturity date at the conversion price of $0.25. Due to certain restrictive
covenants, including, without limitation, a covenant that the Company maintain
at least $5.5 million in cash or cash equivalents on hand at all times while the
Senior Notes are outstanding, the Senior Notes may become current prior to June
30, 2005. Based on these covenants, the Company has recorded the Senior Notes
and the accrued interest on such notes as a current liability.

         During the quarter ended March 31, 2005, holders of certain Senior
Notes converted an aggregate of $395,000 in principal amount and $4,419 in
accrued interest into an aggregate of 1,597,674 shares of our common stock at a
conversion price of $0.25 per share.


                                       13
<PAGE>

ASTRAL LIABILITIES
------------------

         In December 2002, we entered into an exclusive license agreement with
Mixture Sciences, Inc. ("Mixture Sciences") for Mixture Sciences to acquire all
rights to a proprietary immunotherapy platform technology developed by Astral.
Mixture Sciences provided financing to support the overhead and salaries of key
employees involved with this technology for a secured position in the technology
subject to a royalty-bearing license. We had certain rights to repurchase the
technology by paying Mixture Sciences a break-up fee. In satisfaction of the
break-up fee, Astral assigned two Patent Cooperation Treaty ("PCT") applications
to Mixture Sciences. We recorded the funds received from Mixture Sciences
totaling $285,000 as license revenues during the year ended June 30, 2004. On
September 27, 2004, Astral and Mixture Sciences entered into an assignment
agreement whereby Mixture Sciences reassigned all rights to the proprietary
immunotherapy platform, including the PCT applications, back to Astral in
exchange for payments of $300,000 of cash and $420,000 of stock of either Astral
or Alliance, which must be paid prior to December 31, 2005. Upon the signing of
the agreement, the Company made the first cash payment of $100,000 to Mixture
Sciences and subsequently made a second cash payment of $50,000 during the
quarter ended March 31, 2005. The Company has recorded the remaining cash
payments of $150,000 and the $420,000 of stock due as accrued expenses, which
are included in the condensed consolidated balance sheet at March 31, 2005.

OTHER COMMITMENTS
-----------------

         Pursuant to a settlement agreement with a former landlord, the Company
has a commitment to pay $420,000 over the next six months. Alliance has made
payments totaling $365,000 and has included the balance of the compromised
amount in current liabilities in the condensed consolidated balance sheet at
March 31, 2005.

         On July 2, 2003, HUB Properties Trust ("HUB") filed a lawsuit in the
Superior Court of the State of California for the County of San Diego against
the Company, Immune Complex Corporation, Immune Complex, LLC (collectively
"Immune Complex"), and other parties. The suit alleged that the defendants were
liable to HUB for damages stemming from HUB's inability to lease two properties
due to defendants' failure to timely deactivate the radiological materials
licenses on the properties. The suit was for damages in excess of the security
deposit the Company provided in the amount of $779,000. In June of 2004, the
Company deposited $1 million into a controlled bank account as security for any
liability we may incur as a result of the HUB litigation. HUB is entitled to the
funds in the controlled account up to the amount of the judgment. On April 27,
2005, the jury returned a verdict in favor of HUB in the amount of $1,479,000,
or $700,000 in excess of our security deposit. We expensed our security deposit
of $779,000 related to this property in fiscal 2003, accrued an additional
amount of $379,000 in fiscal 2004 and have accrued the remaining $321,000 of the
amounts due in March 2005. The Court signed a judgment incorporating this
verdict on April 28, 2005. HUB also now seeks inclusion in the judgment of an
award of pre- and post- judgment interest, as well as attorney fees and costs.
The judgment currently states that these amounts are "to be determined";
however, if HUB prevails in its request to include these additional aspects of
recovery in the judgment, it is possible that the amount of the judgment will
exceed the amount of our security deposit plus the amount currently being held
in the controlled bank account, which would allow HUB to pursue other of our
assets to satisfy the judgment. If HUB is able to pursue other of our assets to
satisfy the judgment, it could have a materially adverse effect on our financial
conditions and operations. We will substantively and procedurally oppose some of
these additional aspects of recovery. The time and manner of the determination
has not yet been set for hearing. We have filed motions which, if successful,
would reduce the judgment to $638,000, an amount approximately $150,000 less
than our security deposit. The hearing is set for June 2, 2005. In addition, we
are currently evaluating whether we will appeal the judgment.


                                       14
<PAGE>

5. EQUITY

PREFERRED STOCK
---------------

         In May 2000, Alliance entered into a joint venture with Baxter and sold
500,000 shares of its Series F Preferred Stock for $20 million. Subsequently,
the Company sold 293,750 additional shares for $11.75 million. The shares are
convertible at the option of Baxter.

         In March 2004, Alliance terminated its license agreement with PFC
Therapeutics and therefore, the conversion price of the Series F Preferred Stock
to common stock is fixed at $50 per common share (post-reverse split of 5:1).
Based on this conversion price, the outstanding shares of Series F Preferred
Stock are convertible into 635,000 shares of common stock. The Company has
accounted for the Series F Preferred Stock as a component of stockholders'
equity.

STOCK OPTIONS
-------------

         In January 2005, the Company granted options to purchase an aggregate
of 1,250,000 shares of common stock to various directors of the Company. The
exercise price of the options is $0.29 per share (the fair market value of the
Company's common stock on the date of grant). The options vest upon certain
performance-related objectives, as defined, none of which have been reached at
March 31, 2005 and expire in January 2015.

         In January 2005, the Company granted options to purchase an aggregate
of 280,000 shares of common stock to various employees of the Company. The
exercise price of the options is $0.29 per share (the fair market value of the
Company's common stock on the date of grant) and vest through January 2008. The
options expire in January 2015.

         In January 2005, the Company granted an option to purchase 100,000
shares of common stock to a consultant. The exercise price of the option is
$0.29 per share and was valued at $27,000 (based on the Black Scholes option
pricing model) and vests through January 2008. The option expires in January
2015. The Company recognized $11,000 as expense in the accompanying statement of
operations for the three months ended March 31, 2005 in accordance with the
related vesting provisions.

6. NEKTAR THERAPEUTICS

         In November 1999, the Company transferred to Nektar Therapeutics
("Nektar") (formerly, Inhale Therapeutic Systems, Inc.) certain rights to its
PULMOSPHERES(R) technology and other assets for use in respiratory drug
delivery. In March 2002, a supplemental agreement modified and expanded this
original agreement and provided for the Company to receive milestone payments
based on the achievement of future defined events, plus additional royalty
payments based on eventual sales of a defined number of products commercialized
using the technology.

         In February 2005, the supplemental agreement was amended to, among
other things, terminate the Company's right to receive the milestone and royalty
payments discussed above. In consideration of the Company's cancellation of the
right to receive the milestone and royalty payments, Nektar paid the Company
$1,383,000 during the quarter ended March 31, 2005. The Company recorded the
payments as revenue as there are no future services to be performed. The amended
supplemental agreement also provides for the sale by the Company to Nektar of
certain raw material inventories to enable Nektar to develop products based upon
the technology assigned or licensed. Pursuant to the amended supplemental
agreement, Nektar agreed to pay the Company $368,000 upon acceptance of the raw
material inventories within 90 days of receipt. As of March 31, 2005, the raw
material has not formally been accepted, therefore the Company has not recorded
any related amounts.


                                       15
<PAGE>

7. SUBSEQUENT EVENTS

         Subsequent to March 31, 2005 and as of May 11, 2005, holders of certain
Senior Notes converted an aggregate of $150,000 in principal amount into an
aggregate of 600,000 shares of our common stock at a conversion price of $0.25
per share.

         On April 5, 2005, PFC Therapeutics and Beijing Double-Crane
Pharmaceutical Co., Ltd. ("Double-Crane"), entered into a Memorandum of
Understanding ("MOU") for the development of OXYGENT in The People's Republic of
China ("PRC"). On May 13, 2005, pursuant to the MOU, the parties entered into a
Development, License and Supply Agreement (the "Agreement") whereby Double-Crane
will be granted the right to develop and commercialize OXYGENT in the PRC.
Double-Crane will make an upfront license fee payment and will be obligated to
make milestone and royalty payments to the Company. In addition, Double-Crane
will be responsible for conducting clinical trials in the PRC, in accordance
with international guidelines, necessary to receive marketing approval for
OXYGENT and the Company will have the right to use any data derived from these
clinical trials in other territories. Double-Crane will have the option to
manufacture OXYGENT in the PRC after obtaining approval from the regulatory
authorities in the PRC. Double-Crane will also have a right of first refusal to
add specific additional countries to the Agreement upon further negotiation with
the Company.


                                       16
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

(References to years are to the Company's fiscal years ended June 30.)

PLAN OF OPERATION
-----------------

         Since our inception in 1983, we have financed our operations primarily
through the sale of equity and debt securities, and we have applied
substantially all of our resources to research and development programs and to
clinical trials. We have incurred operating losses since inception and as of
March 31, 2005, have an accumulated deficit of $482.7 million. We expect to
incur significant operating losses over at least the next few years as we
continue our research and product development efforts and attempt to
commercialize our products.

         Our revenues from operations have come primarily from collaborations
with corporate partners, including research and development, milestone and
royalty payments. Our expenses have consisted primarily of research and
development costs and administrative costs. To date, our revenues from the sale
of products have not been significant. We believe our future operating results
may be subject to quarterly fluctuations due to a variety of factors, including
the timing of future collaborations and the achievement of milestones under
collaborative agreements, whether and when new products are successfully
developed and introduced by us or our competitors, and market acceptance of
products under development.

FORWARD-LOOKING INFORMATION
---------------------------

         Except for historical information, the statements made herein and
elsewhere are forward-looking. The Company wishes to caution readers that these
statements are only predictions and that the Company's business is subject to
significant risks. The factors discussed herein and other important factors, in
some cases have affected, and in the future could affect, the Company's actual
results and could cause the Company's actual consolidated results for 2005, and
beyond, to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company. These risks include, but are
not limited to, the inability to obtain adequate financing for the Company's
development efforts; the inability to enter into collaborative relationships to
further develop and commercialize the Company's products; changes in any such
relationships, or the inability of any collaborative partner to adequately
commercialize any of the Company's products; the uncertainties associated with
the lengthy regulatory approval process, including uncertainties associated with
FDA decisions and timing on product development or approval; and the
uncertainties associated with obtaining and enforcing patents important to the
Company's business; and possible competition from other products. Furthermore,
even if the Company's products appear promising at an early stage of
development, they may not reach the market for a number of important reasons.
Such reasons include, but are not limited to, the possibilities that the
potential products will be found ineffective during clinical trials; failure to
receive necessary regulatory approvals; difficulties in manufacturing on a large
scale; failure to obtain market acceptance; and the inability to commercialize
because of proprietary rights of third parties. The research, development, and
market introduction of new products will require the application of considerable
technical and financial resources, while revenues generated from such products,
assuming they are developed successfully, may not be realized for several years.
Other material and unpredictable factors which could affect operating results
include, without limitation, the uncertainty of the timing of product approvals
and introductions and of sales growth; the ability to obtain necessary raw
materials at cost-effective prices or at all; the effect of possible technology
and/or other business acquisitions or transactions; and the increasing emphasis
on controlling healthcare costs and potential legislation or regulation of
healthcare pricing. Further cautionary information is contained in documents the
Company files with the Securities and Exchange Commission from time to time,
including the Company's most recently filed Annual Report on Form 10-KSB, and
you are encouraged to read the section entitled, "Risk Factors" included in the
Company's most recently filed Annual Report on Form 10-KSB.


                                       17
<PAGE>

RESEARCH AND DEVELOPMENT
------------------------

         For the nine months ended March 31, 2005 and 2004, we incurred research
and development expenses of $572,000 and $330,000, respectively, for OXYGENT, an
intravascular oxygen carrier that we are developing to augment oxygen delivery
in surgical and other patients at risk of acute oxygen deficit. Research and
development costs to date for our oxygen-therapeutic product candidates,
including OXYGENT, total approximately $156.7 million. While difficult to
predict, we estimate that the completion of clinical trials for OXYGENT will
cost at least an additional $60 million. We do not anticipate that OXYGENT will
reach the market for several years, if at all, and, because of the numerous
risks and uncertainties associated with product development efforts, we are
unable to predict with any certainty the extent of any future expenditures or
when material net cash inflows from OXYGENT may commence, if at all.

         Astral, our wholly owned subsidiary, is engaged in the development of
immunoglobulins that are engineered to bear specific disease-associated
peptides. For the nine months ended March 31, 2005 and 2004, Astral incurred
research and development expenses of $1 million, largely due to the $720,000
expense of the assignment of intellectual property agreement with Mixture
Sciences, and $259,000, respectively. Astral's research and development costs to
date total approximately $12.1 million. Because of the numerous risks and
uncertainties associated with early-stage technology platform research efforts,
we are unable to estimate with any certainty the costs of continued development
of Astral's product candidates for commercialization. We do not anticipate that
any of Astral's early-stage product candidates will reach the market for at
least several years, if at all.

         In December 2002, we entered into an exclusive license agreement with
Mixture Sciences for Mixture Sciences to acquire all rights to a proprietary
immunotherapy platform technology developed by Astral. Mixture Sciences provided
financing to support the overhead and salaries of key employees involved with
this technology for a secured position in the technology subject to a
royalty-bearing license. We had certain rights to repurchase the technology by
paying Mixture Sciences a break-up fee. In satisfaction of the break-up fee,
Astral assigned two PCT applications to Mixture Sciences. We recorded the funds
received from Mixture Sciences totaling $285,000 as license revenues during the
year ended June 30, 2004. On September 27, 2004, Astral and Mixture Sciences
entered into an assignment agreement whereby Mixture Sciences reassigned all
rights to the proprietary immunotherapy platform, including the PCT
applications, back to Astral in exchange for payments of $300,000 of cash and
$420,000 of stock of either Astral or Alliance. Upon the signing of the
agreement the Company made the first cash payment of $100,000 to Mixture
Sciences and subsequently made a second cash payment of $50,000 during the
quarter ended March 31, 2005. The Company recorded the remaining cash payments
of $150,000 and the $420,000 fair value of common stock due as accrued expenses,
which are included in the condensed consolidated balance sheet at March 31,
2005.

RESULTS OF OPERATIONS
---------------------

NINE MONTHS ENDED MARCH 31, 2005 AS COMPARED WITH NINE MONTHS ENDED MARCH 31,
2004

         For the nine months ended March 31, 2005, we recorded a gain on the
disposition of the IMAGENT assets of $303,000, resulting from the recording of
payments from Imcor of $126,000 to fund our obligations, and the assumption by
Imcor of certain of our obligations and settlements with various vendors and
creditors of $177,000 during the period in connection with the IMAGENT asset
sale transaction. For the nine months ended March 31, 2004, we recorded a gain
of $15.7 million, resulting from the recording of Imcor issuing shares of its
stock to Alliance creditors, payments from Imcor of $963,000 to fund our
obligations, and the assumption by Imcor of obligations and settlements with
various vendors and creditors of $11.1 million during the period.


                                       18
<PAGE>

         Our revenue increased to $1.5 million for the nine months ended March
31, 2005, compared to $64,000 for the nine months ended March 31, 2004. This
increase was primarily due to $1.4 million received from Nektar per the
Amendment (as discussed in Note 6 to our unaudited consolidated financial
statements).

         Research and development expenses increased by $987,000, or 168%, to
$1.6 million for the nine months ended March 31, 2005, compared to $588,000 for
the nine months ended March 31, 2004. The increase in research and development
expenses was primarily due to the recording of the $720,000 expense of the
Mixture Sciences assignment agreement whereby Astral reacquired all rights to
certain intellectual property and an increase of $242,000 spent on
OXYGENT-related activities.

         General and administrative expenses increased by $1.3 million, or 160%,
to $2.1 million for the nine months ended March 31, 2005, compared to $791,000
for the nine months ended March 31, 2004. The increase in general and
administrative expenses was primarily due to a $827,000 increase in legal and
accounting fees primarily related to the June Private Placement rescission
activities, including the registration of the stock underlying the Senior Notes,
$321,000 increase in rent accrued as the result of a judgment in a lawsuit (as
discussed in Part II: Item 1. Legal Proceedings), $52,000 increase in public
company expenses, $41,000 increase in information technology expenses and
$24,000 increase in personnel-related costs.

         Investment income increased by $99,000 to $106,000 for the nine months
ended March 31, 2005, compared to $7,000 for the nine months ended March 31,
2004. The increase was primarily a result of higher cash balances during the
period because of the receipt of funds from the June Private Placement.

         Other income was $10,000 for the nine months ended March 31, 2005, a
result of proceeds recorded from the sale of raw material, compared to $84,000
for the nine months ended March 31, 2004, which was primarily a result of
proceeds recorded from insurance dividends and distributions.

         Interest expense was $2.6 million for the nine months ended March 31,
2005, compared to $2.2 million for the nine months ended March 31, 2004. The
expense for the current period was primarily the result of the BCF expense
recorded in connection with the exchange of the Company's common stock for the
Senior Notes on September 24, 2004 and the accrued interest on such Senior
Notes. The expense for the prior period was primarily the result of the
valuation of the warrant and estimated fair value of the common stock issued in
connection with the cancellation of such warrant of $2 million recorded in
connection with the issuance of the PFC Note and the subsequent Senior Note.

THREE MONTHS ENDED MARCH 31, 2005 AS COMPARED WITH THREE MONTHS ENDED MARCH 31,
2004

         For the three months ended March 31, 2005, we recorded a gain on the
disposition of the IMAGENT assets of $44,000, resulting from the recording of
payments from Imcor of $36,000 to fund our obligations, the assumption by Imcor
of certain of our obligations, and settlements with various vendors and
creditors of $8,000 during the period in connection with the IMAGENT asset sale
transaction. For the three months ended March 31, 2004, we recorded a gain of
$13.3 million, resulting from the recording of Imcor issuing shares of its stock
to Alliance creditors, payments of $203,000 from Imcor to fund our obligations,
and the assumption by Imcor of obligations and settlements with various vendors
and creditors of $9.4 million during the period.


                                       19
<PAGE>

         Our revenue increased to $1.4 million for the three months ended March
31, 2005, compared to no revenue for the three months ended March 31, 2004. The
revenue for this quarter consisted of $1.4 million received from Nektar per the
Amendment (as discussed in Note 6 to our unaudited consolidated financial
statements).

         Research and development expenses increased by $171,000, or 83%, to
$376,000 for the three months ended March 31, 2005, compared to $205,000 for the
three months ended March 31, 2004. The increase in research and development
expenses was primarily due to certain OXYGENT development activities.

         General and administrative expenses increased by $525,000, or 161%, to
$851,000 for the three months ended March 31, 2005, compared to $326,000 for the
three months ended March 31, 2004. The increase in general and administrative
expenses was primarily litigation expenses and rent accrual as the result of a
judgment in a lawsuit (as discussed in Part II: Item 1. Legal Proceedings).

         Investment income increased by $40,000 to $41,000 for the three months
ended March 31, 2005, compared to $1,000 for the three months ended March 31,
2004. The increase was primarily a result of higher cash balances during the
period because of the receipt of funds from the June Private Placement.

         Interest expense was $170,000 for the three months ended March 31,
2005, compared to no interest expense for the three months ended March 31, 2004.
The expense for the current period was primarily the result of recording accrued
interest on the Senior Notes.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

         Since inception, we have funded our operations primarily through the
sale of equity securities, payments from our collaboration agreements and debt
financing. From inception to March 31, 2005, we had received $243 million in net
proceeds from sales of our equity securities, $260 million in payments from
collaboration agreements and $74.3 million in debt financing of which $35.8
million of such debt has been converted into equity and $27.4 million of such
debt has been retired through the restructuring of various agreements and the
issuance of warrants to purchase our common stock.

         At March 31, 2005, we had approximately $6.9 million in cash, cash
equivalents and investment securities compared to $8.4 million at June 30, 2004.
The decrease resulted primarily from net cash used in operations of $1.6
million, partially offset by $126,000 received from Imcor to fund payments to
vendors. At March 31, 2005, we had a net working capital deficit of $7 million,
compared to net working capital of $5.9 million at June 30, 2004. The decrease
was principally due to the conversion of shares in the June Private Placement to
Senior Notes and the inclusion of the Senior Notes in current liabilities due to
their associated cash covenant. Our operations to date have consumed substantial
amounts of cash and are expected to continue to do so for the foreseeable
future.

         Net cash used in operating activities totaled $1.6 million for the nine
months ended March 31, 2005, compared to $2.3 million for the nine months ended
March 31, 2004. The decrease in net cash used in operating activities during the
nine months ended March 31, 2005 was primarily due to the $1.4 million received
from Nektar per the Amendment (as discussed in Note 6 to our unaudited
consolidated financial statements), partially offset by an increase in general
and administrative payments, primarily professional fees resulting from the June
Private Placement rescission and SEC-related payments, payments totaling
$250,000 to a former landlord pursuant to a settlement agreement, and the
increase in research and development payments, primarily $150,000 paid to
reacquire certain Astral intellectual property.

         Net cash provided by investing activities totaled $108,000 for the nine
months ended March 31, 2005, primarily due to proceeds of $126,000 received from
Imcor to fund payments to vendors, partially offset by the purchase of computers
and other office equipment. Net cash provided by investing activities totaled
$963,000 for the nine months ended March 31, 2004, primarily due to proceeds
from Imcor.


                                       20
<PAGE>

         At March 31, 2005, the following approximate liabilities and debt
obligations were outstanding:
         (a) $1.3 million owed to various vendors, approximately $356,000 of
which is subject to settlements or reimbursements from Imcor;
         (b) $1.6 million in accrued expenses, primarily consisting of $722,000
in rent and related expenses, $150,000 in cash and $420,000 in Astral or
Alliance stock to regain exclusive rights to certain intellectual property,
$100,000 in deferred license revenue, and $174,000 in payroll and other
expenses;
         (c) Senior Notes in the amount of $10.8 million principal and $333,000
accrued interest;
         (d) $1.25 million in deferred royalty payments to be paid through
IMAGENT royalty earn-outs.

         On June 18, 2003, we sold all of our assets related to our IMAGENT
product to Imcor. To date, Imcor has issued $3.7 million of its common stock to
certain of our creditors and made cash payments to us in an approximate amount
of $1.6 million. In addition, Imcor has assumed or we have settled $20.6 million
in liabilities in full satisfaction of $25.9 million of the foregoing debt.
However, $356,000 of such debt is still outstanding and to be paid by Imcor or
settled in accordance with agreements with the various debt holders. If Imcor is
unable to make the necessary payments, these debt holders will have recourse
against us.

         Until we can generate significant continuing revenues, we expect to
satisfy our future cash needs through strategic collaborations, private or
public sales of our securities, debt financings or by licensing all or a portion
of our product candidates or technology. We cannot be certain that additional
funding will be available to us on acceptable terms, or at all. If funds are not
available, we may be required to delay, reduce the scope of, or eliminate one or
more of our research and development programs or our commercialization efforts.

         In June 2004, we completed the June Private Placement, which was
rescinded in September 2004 and replaced with the Senior Notes (as described in
Note 4 to our unaudited consolidated financial statements). The net proceeds to
us were approximately $10 million. We believe we now have working capital to
fund our operations for the next 12 months; however, due to certain restrictive
covenants, including, without limitation, a covenant that the Company maintain
at least $5.5 million in cash or cash equivalents on hand at all times while the
Senior Notes are outstanding, the Senior Notes may become current prior to June
30, 2005. In this event the Company would have to raise additional funds to
repay the Senior Notes or renegotiate their terms. Therefore, we are seeking
additional collaborative research and development relationships with suitable
corporate partners for our products. Further, additional equity or debt
financing may be required to fund our ongoing operations. Because adequate funds
have not been available to us in the past, we have already delayed our OXYGENT
development efforts and have delayed, scaled back, and/or eliminated one or more
of our other product development programs.

         In April 2004, PFC Therapeutics and Il Yang, a leading South Korean
pharmaceutical research and development and marketing company, signed a
licensing, development and marketing agreement granting Il Yang exclusive rights
to promote, market, distribute and sell OXYGENT for any approved clinical use,
including all future approved uses, in South Korea. Under terms of the
agreement, PFC Therapeutics will be initially responsible for the commercial
supply of OXYGENT to Il Yang and will receive a royalty on OXYGENT sales
following commercialization. Il Yang will also make certain future payments on
the completion of various regulatory milestones for development in Europe and
the U.S.

         Also in April 2004, certain secured creditors that accepted an
ownership interest in PFC Therapeutics in satisfaction of Alliance's obligations
and liabilities to such creditors agreed to exchange their ownership interest in
PFC Therapeutics for warrants to purchase shares of Alliance's common stock.


                                       21
<PAGE>

         On December 22, 2004, PFC Therapeutics and LEO signed an Exclusivity
Agreement to enter into a License Agreement, subject to continued due diligence
by LEO, to develop and commercialize OXYGENT in Europe and Canada. The terms of
the License Agreement, if entered into, will include certain initial and future
payments to PFC Therapeutics upon the completion of various regulatory and
commercial milestones for OXYGENT development in Europe and royalties on
commercial sales of OXYGENT in Europe and Canada. On January 5, 2005, we
received the non-refundable portion of an exclusivity fee of $100,000 per the
terms of the Exclusivity Agreement, which amount is included in current
liabilities in the condensed consolidated balance sheet at March 31, 2005.

         On February 25, 2005, PFC Therapeutics and LEO agreed to amend the
Exclusivity Agreement. The amendment extends the period of time in which LEO may
undertake its due diligence investigation from March 1, 2005 to a date that is
sixty (60) days after submission by the Company to LEO of the results of a
"proof of concept" clinical study in surgery patients to be conducted by the
Company to confirm the results of an earlier pilot study. The Company
anticipates that the "proof of concept" study will commence in the second half
of 2005 and be completed in the first half of 2006; provided, however, that for
so long as the minimum cash covenant set forth in Section 4.12(l) of the Senior
Convertible Promissory Note Purchase Agreement dated September 21, 2004 between
Alliance and certain investors (the "Note Purchase Agreement") is in effect, the
commencement of any such "proof of concept" study will likely require the prior
approval of the Lender Committee (as that term is defined in the Note Purchase
Agreement). Alliance has initiated discussions with the Lender Committee on this
matter. The remaining terms of the Exclusivity Agreement remain in full force
and effect, provided that any definitive license agreement entered into between
PFC Therapeutics and LEO relating to the marketing and commercialization of
OXYGENT will include an additional milestone payment, the amount of which is to
be proposed by Alliance, relating to the "proof of concept" clinical trial
described above.

WHERE YOU CAN FIND MORE INFORMATION
-----------------------------------

         We are subject to the informational requirements of the Securities
Exchange Act and must file reports, proxy statements and other information with
the SEC. The reports, information statements and other information we file with
the Commission can be inspected and copied at the Commission Public Reference
Room, 450 Fifth Street, N.W. Washington, D.C. 20549. You may obtain information
on the operation of the Public Reference Room by calling the SEC at (800)
SEC-0330. The Commission also maintains a Web site (http://www.sec.gov) that
contains reports, proxy, information statements and other information regarding
registrants, like us, which file electronically with the Commission.

         We were incorporated in New York in 1983. Our principal executive
offices are located at 4660 La Jolla Village Dr., Suite 825, San Diego,
California 92122, and our telephone number is (858) 410-5200. Our Web site
address is www.allp.com.

         Our common stock is traded on the OTCBB under the symbol "ALLP.OB."

CRITICAL ACCOUNTING POLICIES
----------------------------

         There were no significant changes in critical accounting policies or
estimates from those at June 30, 2004.


                                       22
<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

         (a) Evaluation of Disclosure Controls and Procedures. The Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the
Company's disclosure controls and procedures. Based upon that evaluation, the
CEO and CFO concluded that as of March 31, 2005 our disclosure controls and
procedures were effective in timely alerting them to the material information
relating to the Company (or the Company's consolidated subsidiaries) required to
be included in the Company's periodic filings with the SEC, subject to the
various limitations on effectiveness set forth below under the heading,
"Limitations on the Effectiveness of Internal Controls", such that the
information relating to the Company, required to be disclosed in SEC reports (i)
is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms, and (ii) is accumulated and communicated to
the Company's management, including our CEO and CFO, as appropriate to allow
timely decisions regarding required disclosure.

         (b) Changes in internal control over financial reporting. There has
been no change in the Company's internal control over financial reporting that
occurred during the fiscal quarter ended March 31, 2005 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROLS

         The Company's management, including the CEO and CFO, does not expect
that our disclosure controls and procedures or our internal control over
financial reporting will necessarily prevent all fraud and material error. An
internal control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the internal control. The design of any system of controls also is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Over time, control may
become inadequate because of changes in conditions, and/or the degree of
compliance with the policies or procedures may deteriorate.


                                       23
<PAGE>

PART II OTHER INFORMATION:

ITEM 1. LEGAL PROCEEDINGS

         On July 2, 2003, HUB Properties Trust ("HUB") filed a lawsuit in the
Superior Court of the State of California for the County of San Diego against
us, Immune Complex Corporation, Immune Complex, LLC (collectively "Immune
Complex"), and other parties. The suit alleged that the defendants were liable
to HUB for damages stemming from HUB's inability to lease two properties due to
defendants' failure to timely deactivate the radiological materials licenses on
the properties. The suit was for damages in excess of the security deposit we
provided in the amount of $779,000. Initially, HUB sought in excess of $3.5
million in damages. On August 21, 2003, Immune Complex filed its cross-complaint
for indemnity against us. We filed a cross-complaint against HUB for damages (a
refund of all or some of the security deposit). In June of 2004, we deposited $1
million into a controlled bank account as security for any liability we may
incur as a result of the HUB litigation. HUB is entitled to the funds in the
controlled account up to the amount of the judgment. If the judgment exceeds the
amount of money in the account, HUB may pursue other of our assets. If we
prevail or the judgment is less than $1 million then any money remaining in the
controlled account will be returned to us. By the time of trial, all parties and
cross-complaints were dismissed other than the lawsuit by HUB directly against
Alliance and the cross-complaint by Alliance against HUB. Because of certain
pre-trial rulings limiting HUB's claim, the damages HUB sought at trial were
roughly $3 million. In addition, the parties stipulated prior to trial that we
owed HUB approximately $638,000 in damages based on HUB's allegations, an amount
approximately $150,000 less than our security deposit. On April 27, 2005, the
jury returned a verdict in favor of HUB in the amount of $1,479,000, or $700,000
in excess of the security deposit. The Court signed a judgment incorporating
this verdict on April 28, 2005. HUB also now seeks inclusion in the judgment of
an award of pre- and post- judgment interest, as well as attorney fees and
costs. The judgment currently states that these amounts are "to be determined";
however, if HUB prevails in its request to include these additional aspects of
recovery in the judgment, it is possible that the amount of the judgment will
exceed the amount of our security deposit plus the amount currently being held
in the controlled bank account, which would allow HUB to pursue other of our
assets to satisfy the judgment. If HUB is able to pursue other of our assets to
satisfy the judgment, it could have a materially adverse effect on our financial
condition and operations. We will substantively and procedurally oppose some of
these additional aspects of recovery. The time and manner of the determination
has not yet been set for hearing. We have filed post-trial motions which, if
successful, would reduce the judgment to $638,000. The motions are set for
hearing on June 2, 2005. In addition, we are currently evaluating whether we
will appeal the judgment.

         On June 13, 2003, we and Imcor jointly brought a patent infringement
action against Amersham Health Inc., Amersham Health AS and Amersham plc
(collectively, "Amersham") in the U.S. District Court for the District of New
Jersey, Civil Action No. 03-2853. The lawsuit alleges that (1) through the sale
of Amersham's OPTISON(R) product, Amersham and its related entities infringe on
eight patents acquired from us by Imcor through its purchase of the IMAGENT
assets; (2) Alliance and Imcor did not and do not infringe any Amersham patent;
(3) Amersham misappropriated confidential trade secrets from Imcor (then
Alliance) when Amersham (then Nycomed) was negotiating a marketing agreement for
IMAGENT; and (4) Amersham is in violation of U.S. Antitrust laws. Alliance and
Imcor are seeking damages and injunctive relief against Amersham. Amersham
counterclaimed for infringement of 12 of its patents and brought counterclaims
against us and our subsidiary MBI asserting breach of contract, breach of good
faith and fair dealing, and tortious interference with contractual relations.
Imcor is paying all costs in this lawsuit, including attorney fees and will keep
any and all damages. Alliance has little financial risk in the lawsuit since all
of the patents at issue and the IMAGENT product are now owned by Imcor. We
believe our claims in this lawsuit have merit and believe Amersham's claims are
without merit and are subject to defenses; however, we do not know if we will
ultimately prevail or if the outcome of the action will harm our business,
financial position or results of operations.


                                       24
<PAGE>

         In December 2001, a lawsuit was filed against MBI in the U.S. District
Court for the Northern District of Illinois. The plaintiff in the action alleged
that MBI breached a license agreement and sought damages and a declaratory
judgment terminating the license agreement, and payment of fees and expenses. In
December 2003, the court entered a judgment in favor of MBI. On January 29,
2004, the court denied plaintiff's motion to amend the judgment. On February 25,
2004, the plaintiff appealed the court's judgment. On January 28, 2005, the
parties settled the lawsuit with MBI paying no money to the plaintiff and
agreeing to return patent rights to the plaintiff in the countries of Japan,
South Korea and Taiwan.

         On February 23, 2001, a lawsuit was filed against us and some of our
officers by two former shareholders of MBI purportedly on behalf of themselves
and others. On March 1, 2001 and March 19, 2001, two additional similar lawsuits
were filed by other former shareholders of MBI. The lawsuits, filed in the U.S.
District Court for the Southern District of New York, allege that our
registration statement filed in connection with the acquisition of MBI contains
misrepresentations and omissions of material facts in violation of certain
federal securities laws. In May 2001, the actions were consolidated. The
plaintiffs are seeking rescission or compensatory damages, payment of fees and
expenses, and further relief. In January 2002, the plaintiffs filed a second
amended complaint adding an additional securities claim against us and the named
officers. In August 2003, the court granted summary judgment as to certain
securities claims and dismissed the claims, and denied summary judgment as to
other securities claims. The parties participated in a mediation in December
2004. The mediation did not result in a settlement, but discussions are
continuing. A trial date was continued to September 19, 2005 in the lawsuit. We
believe that the lawsuit is completely without merit; however, we do not know if
we will ultimately prevail or if the outcome of the action will harm our
business, financial position or results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

         During the quarter ended March 31, 2005, holders of certain Senior
Notes converted an aggregate of $395,000 in principal amount and $4,419 in
accrued interest into an aggregate of 1,597,674 shares of our common stock at a
conversion price of $0.25 per share.

         Subsequent to March 31, 2005 and as of May 11, 2005, holders of certain
Senior Notes converted an aggregate of $150,000 in principal amount into an
aggregate of 600,000 shares of our common stock at a conversion price of $0.25
per share.

         In January 2005, the Company granted options to purchase an aggregate
of 1,630,000 shares of common stock to various employees, directors and a
consultant of the Company. The exercise price of the options is $0.29 per share
(the fair market value of the Company's common stock on the date of grant). The
options expire in January 2015.

         The offers, sales and issuances of these securities were deemed to be
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act") in reliance on Section 4(2) of the Securities Act and/or
Regulation D promulgated thereunder as transactions by the issuer not involving
a public offering. The recipients of the securities represented their intention
to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends were affixed
to the share certificates or notes in such transactions. All recipients had
adequate access to information about us.

         Our ability to declare or pay a dividend on our capital stock is
restricted for so long as the Senior Notes remain outstanding.


                                       25
<PAGE>

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

ITEM 5.  OTHER INFORMATION

         None.

ITEM 6.  EXHIBITS

         INDEX TO EXHIBITS

       EXHIBIT    DESCRIPTION

       10.78      Amendment to Exclusivity Agreement dated February 25, 2005
                  between PFC Therapeutics and LEO. * (1)
       10.79      Amendment to Supplemental Agreement dated February 7, 2005
                  between the Company and Nektar Therapeutics. *
       31.1       Certification of Chief Executive Officer and President,
                  pursuant to Securities Exchange Act rule 13a-14(a) and
                  15d-14(a) as adopted pursuant to Section 302 of the Sarbanes
                  Oxley Act of 2002. *
       31.2       Certification of Chief Financial Officer, pursuant to
                  Securities Exchange Act rule 13a-14(a) and 15d-14(a) as
                  adopted pursuant to Section 302 of the Sarbanes Oxley Act of
                  2002. *
       32.1       Statement of Chief Executive Officer under Section 906 of the
                  Sarbanes Oxley Act of 2002. (18 U.S.C. Section 1350). *
       32.2       Statement of Chief Financial Officer under Section 906 of the
                  Sarbanes Oxley Act of 2002. (18 U.S.C. Section 1350). *

----------
* Filed Herewith.

(1) Portions of this agreement have been omitted pursuant to a confidential
treatment request and have been filed separately with the Commission.



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                      ALLIANCE PHARMACEUTICAL CORP.
                                      (Registrant)

Date:    May 16, 2005                 By: /s/ Duane J. Roth
                                          ------------------------------------
                                          Duane J. Roth
                                          Chairman and Chief Executive Officer

                                      By: /s/ Edward C. Hall
                                          ------------------------------------
                                          Edward C. Hall
                                          Chief Financial Officer


                                       26